Sources close to Lineo said the company had "not to date been acquired," but indicated an announcement was imminent. Other sources confirmed that Metrowerks is making a major announcement next week.

Another source, an independent Linux developer, however, said Metrowerks will acquire key intellectual property assets of Lineo, if not the entire company, on Monday.

Describing Metrowerks interest in Lineo, a source close to the company said: "They see a good mix of Metrowerks being aimed at the application developer and Lineo being aimed at product-level support. Tighter integration between those two would benefit the customer."

Lineo has suffered during the economic downturn. First the company pulled back on its plans for an initial public offering last year, and then restructured to focus on its core embedded market.

Meanwhile, Metrowerks last week announced the completion of its acquisition of the technology assets of Applied Microsystems Corp. The Redmond, Wash., company sold tools for the embedded systems developer.